Engine Performance
Work Example 18

WorkKey Level: 6
NATEF Automotive Tasks: Background

Problem:

You just recently accepted a position at one of the Big 3 automakers setting up auto repair training programs at dealerships throughout the state. As part of your benefit package, you have the choice to 1) use a company car for business, 2) lease a car, or 3) get reimbursement for using your car for business travel. The specifics of each are as follows:

1. Company car: You may use a company car on business only. The company car must stay at your work location whenever not in use. You must use your own transportation to and from work. The company pays all costs (gas, maintenance, insurance and repair) of the car. Your personal car gets 26 miles per gallon and the maintenance and repair costs average out to 28 cents per mile.

2. Lease a car: You may lease a car for your business and personal use. (you will not need another car) The lease costs $350 per month of which the company pays 70%. (Your company assumes you will use the car 70% of the time on company business and the other 30% of the time will be used for personal business). The company will also pay 70% of the cost of gas, insurance, maintenance and repair of the car. The leased car averages 31 miles per gallon and the maintenance and repair costs average out to 28 cents per mile.

3. Reimbursement: The company reimbursement rate for using a personal car on company business is 37 cents per mile.

Determine the best deal for you assuming you average 1900 miles per month while on business and 1500 miles per month personal (includes commuting to/from work). Also, assume an average cost of gasoline of $1.50 per gallon and a 20 day work month.

Solution:

Determine your transportation costs for all three options.

1. Company car:
   No cost for the company car, however you still need a car for personal use.
   1500 miles ÷ 26 miles/gal = 57.7 gal. × $1.50 gal = $86.54
   1500 miles × $0.28/mile = $420.00
   Your personal cost: $86.54 + $420.00 = $506.542.

2. Leased car:
   You can use this car for business and personal use.
   $350.00 × 0.30 = $105.00
   3400 miles ÷ 31 miles/gal = 109.7 gal × $1.50/gal. = $164.52 × 0.30 = $49.35
   3400 miles × $0.28/mile = $952.00 × 0.30 = $285.60
   Your personal cost: $105.00 + $49.35 + $285.60 = $439.95

3. Reimbursement for business use for your personal car.
   
   Cost:
   3400 miles ÷ 26 miles/gal = 130.77 gal × $1.50/gal = $196.15
   3400 miles × $.28/mile = $952.00
   
   Reimbursement:
   1900 miles x $.37/mile = $703.00
   Your personal cost: $196.15 + $952.00 – $703.00 = $445.15
   
   Thus, option #2 ($439.95) is the best option for you.